Putting the Pieces of the Puzzle Together

Counterfeit Busting 101

CSA 2012 Annual Conference

Monday, June 11, 2012 Quebec City, Quebec

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Presented by

Lorne M. Lipkusof

Kestenberg Siegal Lipkus LLPBarristers & Solicitors

65 Granby Street, Toronto, Ontario, M5B 1H8

www.ksllaw.com

Tel: 416-597-0000 Fax: 416-597-6567

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What is being Counterfeited?

Answer

1.ANYTHING &

2. EVERYTHING

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Alcohol

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Apparel & Accessories

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Copyright Kestenberg Siegal Lipkus LLP 6

Automotive

Batteries

77

Belts & Buckles

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Cell Phones & Accessories

99

Designer Bags

1010

DVD’s

1111

Electrical

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Electronics

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Food & Beverages

1414

Health & Beauty

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Household Items

1616

Ink Cartridges

1717

Pharmaceuticals

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Tools

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Shoes & Boots

2020

Software

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Sunglasses

2222

Toys

2323

Watches

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… and

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Fake Wine Discovered At LCBO Prompts Police Probe

-The Toronto Star, March 18, 2011

• “It was awful. It tasted like homemade wine,” said Campbell, who wasn’t surprised that fraudsters targeted the Negrar, which retails for $34.95.

• “They’ve been in business for decades, and Schiralli has represented them for 40 years. They were hurt, puzzled, devastated. They couldn’t believe that someone had done this,” said Campbell. A staff member of Campbell’s tried the fake stuff after buying it at an LCBO store and immediately noticed something was wrong.

At left is a fake bottle of 2006 Negrar Amarone Classico. The legitimate one is on the right.

The Sharjah Economic Development Department Destroys 21,000 Fake Sanitary

Napkins

© The Gulf Today, April 22, 2011

Fitness Equipment

• October 19, 2009– 32,000 pieces– 2 dozen seizures– Maliby Pilates Chair– Bow Flex Home Gym

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Blackberry Handsets

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© Report on Business Magazine, The Globe and Mail, May 2010 Edition

Don’t be fooled by the name on the to the untrained eye, the

keyboard, splash screen, convenience keys and trackball all mimic the

BlackBerry 8900

Drawbacks? There are a few: The BlueBerry does not feature RIM’s world-class operating system; it has no push e-mail (it checks for messages on a set schedule); no

specialized encryption (BlackBerry’s Enterprise Server is

famed for its security); no ability to install third-party apps (like you might find on BlackBerry’s App

World). All that, and it’s buggier than a Winnipeg outhouse.

Copyright Kestenberg Siegal Lipkus LLP 31

43,600 Counterfeit

Circuit Breakers Recalled

Occupational Health & Safety Online – March 2010

© http://www.ksdk.com, May 17, 2012

• Electronic items are now the number one category of knockoffs seized by agents at O'Hare International Airport

• Experts caution that counterfeit electronics rarely perform as advertised and can be dangerous.

• It can look very similar to the actual, authentic product but be much different internally and therefore, potentially, be much dangerous

Counterfeit electronics bust at O'Hare International Airport

Phony smoke detectors given out by Atlanta Fire Department

• The Atlanta Fire Rescue Department recalled more than 18,000 smoke detectors it distributed after discovering they were counterfeit

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© Consumer Reports, May 31, 2011

• Smoke detectors bore a counterfeit certification hologram

• Analysis deemed the circuit board incomplete

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© The Fiscal Times, May 22, 2012

U.S. Military Equipment Built with Counterfeit Parts

• Counterfeit parts have been incorporated into the Air Force’s largest cargo plane, into helicopters and into a Navy surveillance plane

• 84,000 counterfeit electronic parts supplied for a collision avoidance system used in the C-12 and Global Hawk aircraft.

Pitfalls of Counterfeit-Part Epidemic Exposed

• Homeland Security Today reported that the number of counterfeit parts that are vital to the computer industry is expected to reach record high levels as the semiconductor industry enters “a phase of accelerating growth,” according to an analysis of trends conducted by IHS.

• “The scale of the counterfeit problem has grown dramatically in recent years, with reports of counterfeit parts quadrupling from 2009 to 2011,” IHS said. “Supply chain participants in 2011 reported 1,363 separate verified counterfeit-part incidents worldwide, a fourfold increase from 324 in 2009.”

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© Homeland Security Today – May 23, 2012

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“UN ties counterfeits to organized crime”

Copyright © 2007 USA Today Dec 14, 2007

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TURIN, Italy - “Counterfeiting is a dangerous and growing enterprise controlled by organized criminals who are exploiting the same trade routes used for trafficking drugs,

arms and human beings, the United Nations said in a report released Friday.”

“The report said counterfeiting carries far lighter penalties than traditional crime syndicate activities, such as trafficking drugs. But it provides much

higher profits.The most well-known criminal organizations involved in counterfeiting are the Chinese triads, the Japanese Yakuza, the Neapolitan Camorra

and the Russian Mafia, the report said.”

“Italian anti-Mafia prosecutor Franco Zuccarelli, who attended the release of the report, said a Camorra turncoat bragged, as recently as 2003, of the

"impressive" profits from counterfeiting. Investigators in Indonesia have said the Calabria-based 'Ndrangheta are trafficking in counterfeit CDs and DVDs in

Asia, he said.”

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“UN ties counterfeits to organized crime”

(CONTINUED…)

Copyright © 2007 USA Today Dec 14, 2007

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“Because entrepreneurs lose profits and states lose tax revenue, counterfeiting slows economic growth and costs an estimated 100,000 jobs in the European Union alone”

Fake baby formula caused the deaths of at least 13 babies in China in 2004 and fake raki, a Turkish alcoholic beverage, killed 23 people in 2005.

"We need to make citizens of the world aware that counterfeit products can damage consumers' health and economies, while reinforcing organized crime," Zuccarelli said

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Counterfeit Goods and Their Potential Financing of International TerrorismZachary A. Pollinger Harvard University

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“An example of one such statistic [links between counterfeiting and terrorism] is Interpol’s 2004 seizure of $1.2 million worth of counterfeit German brake pads. Later

investigations of the products revealed that their proceeds were earmarked for supporters of the Lebanese terror organization Hizbollah.

According to Interpol Secretary General Ronald K. Noble, “Linking the Hizbollah to counterfeit brake parts shows not only the link between terrorist financing and intellectual property crime, but also how intellectual property crime is not a victimless one – the

potential danger to the public from this sort of criminal activity is too serious for governments and law enforcement to ignore.”

“More specious connections to Hizbollah have been reported with counterfeiters based in Los Angeles County. Authorities have found case specific evidence of these

connections (in the form of Hizbollah flags, tattoos, and pamphlets) in the homes and on the persons of numerous convicted counterfeiters.”

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Counterfeit Goods and Their Potential Financing of International Terrorism (continued)

Zachary A. Pollinger Harvard University

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“Interpol has found that Chechen rebels fund their operations through the sale of pirated CDs and that paramilitary groups in Northern Ireland fund their operations by counterfeiting DVDs. Even Al Qaeda has been linked to the counterfeit industry

through the sales of fake perfumes and shampoos.”

“Finally, according to New York City police commissioner Raymond Kelly, the sale of pirated CDs was responsible for funding the 2004 bombing of a Madrid train – an

incident that resulted in the deaths of 191 people.”

“The reason that terrorist organizations would fund themselves through counterfeiting is simple: fast, easy, plentiful cash. Counterfeiting and piracy are extremely easy

industries to enter and would help terrorists maintain a certain level of anonymity. In addition, the profits from counterfeit sales significantly outweigh those of other illegal

products. While the sales of cocaine might yield an entrepreneurial criminal a 100% profit margin, sales of pirated Windows software would earn a savvy counterfeiter

profits of up to 900%”

Copyright Kestenberg Siegal Lipkus LLP

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Anti-Counterfeiting Organizations

National&

International

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• The Certification Industry Against Counterfeiting (CIAC) is an international network of certification organizations committed to stopping the worldwide proliferation of products bearing counterfeit certification marks that may endanger public health and safety.

• In addition to essential enforcement, CIAC and INTERPOL recognize the need for a strong educational program related to anti-counterfeiting and the importance of third party independent certification. CIAC's mission will include a comprehensive focus on education programs for the public, manufacturers, distributors, retailers, law enforcement and other government agencies.

www.ciac-cert.org

CIPCCanadian Intellectual Property Council is a Canadian business coalition

designed to provide a central voice to press for stronger intellectual

property protection both in Canada and worldwide. 

CIPC’s main objectives are to ensure that the Canadian government

provides the necessary resources to create the right environment for an

innovative economy to flourish in Canada and fight the rampant

counterfeiting and piracy of intellectual property. 

CIPC will lobby the government and push for these changes, together

with our international counterparts, to fight for intellectual property

protection worldwide and produce comprehensive reports on IP trends,

and better measure the impacts of counterfeiting and piracy

www.ipcouncil.ca42

Copyright Kestenberg Siegal Lipkus LLP

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Canadian Anti-Counterfeiting Network

Mission Statement:

To dramatically reduce the manufacture, importation, distribution and sale of counterfeit and pirated products in

Canada through public education, training of law enforcement and lobbying for legislative change and

increased financial and human resources to combat the problem.

www.cacn.ca

IACC

• The IACC is the largest multinational organization representing exclusively the interests of companies concerned with product counterfeiting and copyright piracy.

www.iacc.org

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What do we do with the Counterfeits?

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Questions or Comments ?

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Lorne M. LipkusKestenberg Siegal Lipkus LLP

Telephone: 416.984.9992 (Mobile)

Office Direct: 416-342-1112

Office: 416.597.0000 Ext. 112

E-Fax: 416-342-1102

E-Mail: llipkus@ksllaw.com

Website: www.KSLLAW.com

Thank You

Lorne M. Lipkus